RA Capital Management's 42 Stock Portfolio: Top 10 Holdings Analyzed - Sure Dividend

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RA Capital Management’s 42 Stock Portfolio: Top 10 Holdings Analyzed


Updated on June 21st, 2021 by Nikolaos Sismanis

Founded in 2002 by Peter Kolchinsky and Rich Aldrich, RA Capital Management is a Boston-based hedge fund specializing in multistage life science investments. The fund holds around $4.6 billion in assets under management (AUM). The firm is comprised of professionals with training in biology, chemistry, and medicine who possess industry experience at the executive and board levels.

Investors following the company’s 13F filings over the last 3 years (from mid-May 2018 through mid-May 2021) would have generated annualized total returns of -0.06%. For comparison, the S&P 500 ETF (SPY) generated annualized total returns of 18.60% over the same time period.

Note: 13F filing performance is different than fund performance. See how we calculate 13F filing performance here.

You can download an Excel spreadsheet with metrics that matter of RA Capital Management’s current 13F equity holdings below:

 

Keep reading this article to learn more about RA Capital Management.

Table Of Contents

RA Capital Management’s Strategy & Values

RA Capital is a unique hedge fund, as 100% of its portfolio investments are allocated in the healthcare sector. The company holds years of experience in the industry. It is dedicated to evidence-based investing in listed and non-listed life science companies in the various stages of developing drugs, medical devices, and diagnostics.

Their strategy includes providing seed capital to startups, leading private funding rounds, and staying by a company’s side through their journey towards an IPO. RA Capital’s unique insight into the sector allows companies to take their early ideas from the labs to a commercialized product.

What differentiates Kolchinsky and his team from other hedge funds is their expertise in RNA, protein-folding correctors, and gene therapy. Such expertise is rate, and this is doubly true when that knowledge is combined with finance and investing expertise. With most funds focusing on more conventional investment ideas, quite often mimicking the major indices, Ra Capital offers its clients an alternative investment strategy that attempts to bypass the overall market’s systematic risk and returns.

The firm’s values stand on being conscious about the ways in which RA interacts with both its own people and those outside the company. Mr. Kolchinsky has developed a set of principles for RA, by which working relationships are founded on trust, collaboration, diligence, and integrity. Mr. Kolchinsky believes this is how everyone’s potential is maximized, and strong relationships are built.

Portfolio Development & Private Investments

Since the fund helps guide small firms when they are getting started and hopes to achieve an IPO, RA Capital holds both public and private companies. The public equities part of the fund currently has 42 stocks, the top 10 of which account for nearly 66.9% of the total weight.

The company’s strategy is reflected in these holdings, as most of them are straight out of their IPO phase, with very short trading histories, and an average market capitalization of around $4 billion. As mentioned, 100% of the holdings are in the life sciences sector.

Source: 13F filings, author

During the past quarter, RA Capital made the following noteworthy portfolio changes:

New Buys:

New Sells:

Many of the fund’s holdings, however, are not listed, and consist of private investment in their early stages, before commercialization. Out of RA Capital’s 198+ private investments, nearly 97 have resulted in a successful exit, which is a testament to management’s skills in identifying diamonds in the rough early on and nurturing them.

Some of the company’s private highlights include the following investments:

Novavax, Inc. (NVAX)

Despite being a publicly listed company, RA Capital entered into a $200 million private funding round earlier in June, as Novavax was in need of capital. RA Capital’s expertise and value-creation in the sector quickly materialized, as shares have more than tripled since.

Moderna, Inc. (MRNA)

Moderna has been occupying the investing headlines over the past few months, due to the rollout of its COVID-19 vaccine. The company has been publicly listed for nearly two years, in which period shares have rewarded investors with multi-bagger returns. RA Capital invested in the company back in 2015, at a fraction of its current valuation.

Pandion Therapeutics Holdco LLC (PAND)

Finally, the fund participated in Pandion’s Series B round of $80 million. The biotech company went public just months after, at a valuation nearly six times higher than its private funding. Considering that the company is missing from RA Capital’s latest 13f holdings, the hedge fund booked a quick multi-bagger profit in a matter of months.

These are just a glimpse of RA Capital’s multiple successes when it comes to its private allocation of funds.

Final Thoughts

RA Capital Management is a special hedge fund. While the fund’s public-equity returns may seem weak, its actual returns should be much higher, derived froth investing in healthcare companies before they go public. Mr. Kolchinsky and his team are true value-creation experts with deep industry know-how.

As a result, investors are likely to find several hidden gems in Ra’s equity portfolio. Keep in mind, however, that a relatively high familiarity and experience must be possessed by retail investors too before investing in the very risky biotech industry.

 

Additional Resources:

Appaloosa Management’s 40 Stock Portfolio: Top 10 Holdings Analyzed

Viking Global’s 75 Stock Portfolio: Top 10 Holdings Analyzed

Lone Pine Capital’s 37 Stock Portfolio: Top 10 Holdings Analyzed

Baker Brothers’ 93 Stock Portfolio: Top 4 Holdings Analyzed

Melvin Capital’s 56 Stock Portfolio: Top 10 Holdings Analyzed

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